A firm purchased $40,000 of supplies in its first year of operations but used up only $30,000 of the supplies during the year. Therefore:

Question

Quizplus · Accepted Answer

The matching concept requires that expenses be matched with revenues in the same period. Therefore, the firm should report only the amount of supplies that were used during the year ($30,000) as an expense, to obtain an accurate reflection of the profits for that period. The remaining $10,000 of supplies should be reported as an asset on the balance sheet at the end of the year.

A Firm Purchased $40,000 of Supplies in Its First Year